Billion dollar corporation profit booms 600% on JobKeeper

I am happy for stimulus to prioritise speed over precision given that is its job. But there are limits. If K&S Corporation is any guide then JobKeeper has crossed them:

This is a 600% increase in net profit:

All of it attributable to $12.4m in JobKeeper payments.

WTF.

David Llewellyn-Smith
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Comments

  1. And that’s only til the end of June. By the time JK ends they’ll have been handed out a motza.

    • DominicMEMBER

      Another Gubmint scheme subjected to the law of unintended consequences — same as it ever was.

      The reason Govt initiatives deliver bad outcomes, more often than not, is because they are utilising ‘other people’s money’.

      Easy to tip money down the drain when it’s not yours.

      • What you say is true.
        The flaw of socialism is that it is based on improperly using other peoples’ money – to benefit unproductive people.
        Similarly the flaw of capitalism is that it is based on improperly using other peoples’ natural resources – to benefit unproductive people.

        • Yep, the LNP are hardcore socialist… In fact they are the end result of failed capitalism. Handing out average workers hard earned to corporations is the end result of corrupt capitalism. The problem with capitalism is the goal is to be the winner at all cost. If enriching the wealthy is your goal then jobkeeper was a great, successful plan.

    • The sales pitch was that it would (JK) pay wages but morphed into pay shareholders. Did the revenues hold up or was it fraud?

  2. WTF indeed. This result doesn’t seem like it has much to do with its ‘ongoing focus on improving the quality and contribution of revenue’.

  3. TailorTrashMEMBER

    Now that’s “a nice little earner”. Make any Arfur Daley
    proud indeed ….and there are plenty of them doing it too .let the good times roll …

    • It’s why luxury car sales have leapt. Use job keeper to pay your staff and pocket the majority of wages you were going to pay them

  4. dissonanceMEMBER

    In Perth virtually all the businesses I know personally, and hear about from others, are having the best trading ever right now. Everyone had one bad month in March during lock-down, then the stimulus hit and business has gone insane. There is a 6 month waiting list for Landcruiser Sarah (top of the range $150k model) because businesses were desperately trying to reduce their tax bills with the large asset instant write-off stimulus.

    Some are only getting $10k a month from jobkeeper, one I know $80k mnth (45 employees), obviously others much more still. Even restaurants are killing it because staff are the biggest cost now free (only work each employee $750 worth of hours per week) and the the next biggest expense rent is well under half because ‘turnover’ is down. Add in the $25k bass credit either side of June 30th if you don’t mind.

    Why are businesses so busy you wonder? Even business owners who have never been making more money are not paying their mortgage or car loans because the bank let them off in April and “why start back now?” Just tell the bank “you’re concerned about how things will pan out, let’s just wait and see” lol. That’s $1000 per week spending in the pocket right there, mortgages are always on the never-never, who cares about an extra year on a 20 year loan. $20k super… I’m in for that to, like who has any intention of saving enough to replace the generous pension and health care card. At near zero rates you need millions to earn an equivalent income, not likely I want a new car now thanks.

    Maybe it’s just WA, but the media only want to report how tough a few are doing while so many are making out like bandits. Who thought up the idea that one month of 30% below last years turnover would qualify for 6 months of free money forced down you’re gullet regardless of how hard and high trading conditions bounced back? I’m a well off ex-business owner, liberal voter so normally I’m all for a little bit of help for the businessman. But the fire hose of cash being pumped over the economy is completely un-targeted and incredibly wasteful… it defies any logic, it’s insane.

    PS: for the housing bears here of which there are many, my advice is don;t go shorting the western suburbs and better post codes. Between the jobkeeper profit rocket and a booming stock-market rebound a lot of people will be upgrading to a better post code. Every house on a good block in area gets an offer in days, everything is under offer…

    • Know IdeaMEMBER

      It is understandable that the system is being gamed, that was perhaps inevitable. Even so, there must be more productive assets to purchase over a Landcruiser Sahara.

      • But have you seen the Landcruiser SARAH! She’ll knock yer socks off. Best truck to roll up to a relations party in. Pant!es drop instantaneously.

    • Then they are all going to get absolutely hosed by the ATO and their banks. Yes all these things are possible if you just lie – but all these things come with steep fines and terrible economic consequences.

      Just one example – Super.

      People are taking that out hand over fist and buying cars and most trying to use if for a house deposit – they are all being investigated for fraud.

      Those that did it and tried to use if for a housing loan – find out they now have a bad credit history and can not get any finance due to the fact it can only be taken out under extreme hardship.

      This is impacting peoples normal financial operations who thought they would just take out a quick $10k.

      Same for the BAS – ATO have already cracked down on this.

      JobKeeper is also being audited.

      So yeah – nice try. Perth rents and prices are cactus – we have the data mate.

        • MountainGuinMEMBER

          While the ATO can investigate for fruad and will prob land a few high profile cases, how many cases can they look into and how hard will they treat some tricky accounting used to get a firm eligible for JK.
          Don’t get me wrong, these folk milking all us taxpayers dry is an utter disgrace, but tackling such problems need resources and a will to act.

      • Ian ArunMEMBER

        Yes Perth Prices are plummeting in outer suburbs however desirable suburbs are holding up well. Rentals available have gone down about 50% compared to last year and about 27% compared to a month ago. overall compared to east coast Perth is looking rather good. dont get me wrong i still believe houses are way over priced and it would correct sometime. at least from what i can see around where i live and work things are holding up well. inner suburb land prices have gone up since the house building scheme as well; most likely they would come down once the scheme is over.

    • so we are proud turning our market based economy into a soviet style centrally planned welfare state?
      future is bright

      • DominicMEMBER

        Well, it’s kind of inevitable when the gubmint keeps intervening to an ever extent — in two years from now it’ll be a lot worse.

        • Whether it is “worse” or “better” in 2 years depends which side of the fence you are on.

          • DominicMEMBER

            Well, it may not be in Dunderberg’s plans but if I were a betting man, I’d say there’ll be an additional few hundred bil tipped into the economy to keep it looking sweet. And why not, when you can print it all at the flick of a switch — and it doesn’t ‘cost’ the country anything 😉

    • drb1979MEMBER

      Given WA has the virus under control would love to hear the screaming of the west aussies if ScoMo had the guts to stop JobKeeper for any business registered in WA!

      • MountainGuinMEMBER

        Well they may pay yet. Will GST formula take account of Vic getting smashed? I feel that it does but there is some averaging, perhaps overv3 years.

    • Interesting and you’re right about the media. As my sister said the other day when we were listening to the radio, “I don’t know why they keep saying everyone’s doing it tough, everyone I know is happy; happier than ever.”

      • My guess, the media are corporations too, in a time when everyone has their hand sticking out for more. Just say things are bad and tough.

        Years back, when I owned a business, my accountant drilled into me, you’re not doing well, you’re poor and struggling, in case anyone asks. I was neither, the books were.

    • Sounds like times are good in WA – COVID level stimulus with no COVID economy. Sounds like paradise compared to say Melbourne where there are people/small business owners doing it tough.

      • I’m just waiting for Victoria to have its hand outs cut off because the rest of Australia doesn’t need them.
        Hatred of the welfare recipient (when its not business) is strong in the liberal party.

  5. So its profit is re JobKeeper which possibly ends one day, Sept 2020 or March 2021. Where is the future profit going to come from or indeed what will it be, given JK has run its course??

    • JK will stop after the border is opened.

      The border will be opened before the end of this year.

      The future profits will come, as has been the case, from a constant stream of new migrants. Just like it has since little Johnny turned up the dial 20 years ago. Just like it will for the next 20 years.

  6. I don’t remember similar outrage when bank profits were rising as the RBA lowered teh rates again and again and again and again.

    Why is profiting from a government wage subsidy any worse than profiting from government interest rate manipulation? Especially considering it’s only a piddly $10m.

    • It’s not.
      All the talk of corporate rentseeking or rentseeking by specifestors etc. is glib.
      Most people when given possible access to government money will grab it. The stoic, noble battlers are every bit as bad as rapacious CEOs and Boomers.

  7. It’s only a rort if you’re not in on it.

    Quote from my builder. His accountant rang him. Told him his ‘salary’ from the company that front runs his profitable business was about to go down by 30 per cent… oh yes, and that of his wife, who does fuck all for him.

    $3000 per fortnight for someone whose business profit is in 6 figures and he is busier than ever.

    I’d dob him in, but it’s probably all legal. What a fucking country when the connected can power ahead, while essential workers get nothing extra but their existing wage.

    The situation could have been much better solved with a UBI

    • UBI is a terrible idea and I can absolutely guarantee that you will come to bitterly regret it, if it is ever rolled out in Australia.

      given the structure of the country’s economy and society (using that term loosely), you can be sure that every cent of the UBI will be extracted from those who “need” it . Rents, energy, food prices will all rise to absorb this new income. Debt will expand and so interest spend will also rise.

      All that UBI will “trickle up” to those already on the receiving end of these flows.

      It’s built into the structure. Unless the structure is radically altered, it can’t be avoided.

      • DominicMEMBER

        Well said.

        I’ve always argued that the biggest supporter of welfare (in any form) is big business — traditionally considered to be ‘conservative’ when it comes to Gubmint spending – but the owners of capital are the biggest beneficiaries of this welfare … in the end.

      • BoomToBustMEMBER

        +100% – Superannuation is another example of this, it made everything much more expensive

      • UBI, like the JG, LVT, MMT and any other combination of letters is neither good nor bad. It is what surrounds it that ends up making it good or bad. I can see the potential merit in a UBI but only after the cost of living is dealt with first. If the rentseekers and pocket pickers aren’t dealt with then the the improvements will be minimal for those who could possibly gain the most from it while the usual suspects just throw theirs on the pile while sucking up everyone else’s.

        • Correct, footsie.

          In this pure theoretical sense, low interest rates are also neither good nor bad. But in reality (which is full of the seeker and pickers… clippers too) they have proven to be very very bad.

      • Trout à la Crème

        UBI is a bribe that does nothing to fix the underlying issues. And the the cost of living, rentseekers and pocket pickers will not be dealt with first. It’s similar to calling the first home vendor boost a first home owner grant, it ignores where the flow inevitably ends up as opposed to where it is first distributed.

      • Jumping jack flash

        100 percent but you hit the nail on the head when you said debt will expand. That is the only point of it.

        A UBI is completely equivalent to an interest rate cut.
        Interest rates being cut do nothing for wages, they just expand debt and make houses more expensive.

        Trickle up is the name of the game in the New Economy. Why else do we need all the 3rd world slaves, and why does everything stop as soon as we don’t have them?

    • Almost exact ‘situation ‘ a mate is in. 12 employees on JK, plus he and wife. Busy as usual, and tried to get off it, but can’t apparently, so just ‘have’ to stay on it til October.
      Nice little earner!

  8. This will be the least of the examples out there. I know of multiple large businesses that fudged the March accounts to qualify for eligibility, and have never been doing better.

    JobKeeper will go down in history as one of the most sloppily designed, poorly targeted, and most rorted pieces of government largesse this country has ever seen.

    It makes Pink Batts and School Halls look like a Girl Guides’ fundraiser.

    And it’s all going to be paid for by “growing” the economy via a rampant immigration intake.

    • bolstroodMEMBER

      Yep everyones already forgotten that the national debt leading into the Corona Virus was twice that of the previous Labor Govt.
      The Scrotumberg are magicians

  9. Arnold J Rimmer

    ATO will never ask for all this money back, imagine a million small businesses having to pay back $200,000. They’d all be bankrupt. Everyone knows of cases of rorting, it’s endemic. As mentioned before, its a feature not a bug. Remember, never let a crisis go to waste. Also, rudds school halls was a great program, work in every town in Australia and useful infrastructure. Its just that the murdoch media hated rudd. Imagine jobkeeper under labor, media would have a brain embolism.

    • The ATO will want to find a couple of cases and make them public so they scare people when JK2 comes in.

  10. Appalling. Transport and logistics was one area to withstand most of the fallout of lockdown, in fact it became more important than ever. K&S has a dozen or so current vacancies on Seek and on the K&S careers site (also Seek).

  11. Locus of ControlMEMBER

    I don’t know why you’re surprised. When Jobkeeper came in I heard from many that the businesses they worked for had done some nifty accounting to qualify and then effectively outsourced their labour costs to government for the next six months. Labour costs are usually the second largest overhead on your books after rent and wouldn’t it be awesome if you could convince someone else to pay for it? Having eliminated that cost (labour) you can boost your revenue, if not your profit. You’d be crazy NOT to be in on it.

    • Locus of ControlMEMBER

      It’s just another take on socialise the losses/ costs (labour costs in this case) and privatise the profits.

  12. On a good year the company pulls through just $3.2m in profit from $900m in revenue.
    Their last cost of good was $800m with $300m in wages (quite high IMO)
    They would have to post a $630m or less revenue to receive JK. That’s certainly probable.
    But $12.4m in subsidies isn’t going to help a drop of $270m in revenue. You could only imagine they would be in serious difficulties.
    They would have had to cut cost hard and probably stand down half their drivers, probably more.
    Will have to wait for their 2020 finances to see what happened.

    • They would have only had to show a 30% drop in revenue for a month. After that, they could have had higher revenue than the previous years.

      • As i understood its each and every month compared to the year before. Am I wrong?
        So you mean a company can post a 30% loss in March and receive JK all the way to September (6 months) without posting a loss?

        • “So you mean a company can post a 30% loss in March and receive JK all the way to September (6 months) without posting a loss?”

          Not even a loss, just a fall in turnover (essentially revenue). You could get it even if your profits were increasing. It looks like they divested some businesses during the year which would have helped.

  13. Reus's largeMEMBER

    Interesting that in spite of what it seems like from the comments that everyone is making out like bandits, house prices are still falling, when the jobrorter gets rolled back, the house price crash is going to be on like donkey kong .

  14. I would really hope ASIC put out some guidance and say that they would take a dim view of companies paying out executive bonuses off the back of JK windfalls like this.

  15. RanganutsMEMBER

    At least half of the $12.4 million will end up back at the ATO.
    – Employer will pay 30% of the profit in company tax $12 million at 30% $3.6 million.
    – Employees pay tax on the $12.4 million received in wages. If the average marginal rate s 20% then $2.48 million in PAYG.
    – Assuming people continue to spend then the GST collected on $12.4 million will be another $1.1 million

    $7.18 million back to the ATO.

  16. Jobkeeper is effectively ‘dole hider’ and ‘rent seeker’ in the big markets of Melbourne and Sydney.

    The moment it gets scaled back, there’ll be lay offs galore and plenty more signing up for Jobseeker.